Fintech has already brought multiple revolutionary solutions to our daily activities. At the same time, the industry players are not going to stop there – growth prospects for the market are immense. This time, we will reveal some of the hottest fintech trends so that you have a clear picture of how exactly this rapidly evolving finance technology will transform the future of banking and finance.
Qulix Systems is a long-time player in the fintech market. Among our clients are global and regional banks, financial consultancy firms, as well as fintech giants and startups. Throughout 20 years in the market, we have managed to see and participate in the growth and development of multiple fintech business lines – from mobile payments to stock-trading apps, blockchain and cryptocurrency, and more. So, today we’re going to share with you some insights on the future of the fintech market based on our real knowledge of the industry.
Fintech Phenomenon: Statistics and Facts
Today financial technology as an industry has reached globally an unprecedented scale. According to the EY Global FinTech Adoption Index 2019, fintech adoption rates rose to an average of 64% this year.
Nevertheless, without any doubts, this is just the beginning.
Given that 96% of global consumers are aware of at least one alternative fintech service relating to making a payment or transferring money, the number of mobile contactless payment users alone in 2020 may even exceed the projected 760 million.
Naturally, the ‘fintech’ boom could not but harm traditional banking institutions – sources tell the adoption of fintech services is one of the main causes visits to bank branches are set to drop 36% from 2017 to 2022.
While many banks are still waging wars for customers with fintech companies, 60% of credit unions and 49% of banks in the U.S. are taking a more forward-looking approach – the one focused on fintech partnerships.
The truth is, the Internet is abuzz today with news of incredible growth of financial technology, and above we have covered only a tiny portion of the huge financial transformation. However, even those few are pretty demonstrative – fintech is actively changing our banking habits now and in the future will transform the financial services sector beyond recognition.
So, what fintech trends will drive change in the financial services market for the year and beyond?
Keep on reading to get it!
Top 6 Fintech Trends to Watch Out for in 2020
#1 The growing dominance of blockchain technology
Blockchain technology, mainly used in financial services in China, is going to gain popularity all over the globe. In the U.S., for example, investment in blockchain fintech is projected to reach $6,700 million by 2023.
Among essential fintech industry trends, this one was the most easily predictable, mainly due to the technology’s potential to prevent fraud and identity theft.
Moreover, in addition to the fact that blockchain can save financial institutions from multimillion-dollar data breach fines, it also can be used for money transfers, identity management, data sharing, supply chain monitoring, and much more.
#2 Artificial intelligence (AI)
According to the forecast of Autonomous Research, AI technologies will enable banks to reduce operating costs by 22% around 2030, which means that savings can reach $1 trillion in the long term.
Fintech companies for sure will be among the major adopters of the trend and further drive its growth.
During 2020, AI-driven chatbots and virtual assistants will continue to help financial institutions with reducing operating costs, preventing cyber fraud, providing consulting services, taking customer experiences to the next maturity level, etc.
Still, despite the growing interest in AI’s applications across the banking and finance sector in 2020, the speed of adoption will be restrained by a global AI talent shortage.
#3 Increased consumer interest in neobanks
What are neobanks anyway? What are their advantages? Neobanks are fully-digital financial institutions that provide internet-only financial services and lack physical branches.
By moving everything online this type of bank truly challenges the traditional banking system. It offers the services almost identical to those rendered at traditional banks and credit unions (for instance, payments and money transfers, balance checks, checking/savings accounts, loan products, and share trading, etc.).
One of the most substantial advantages of these new players is that they can offer customers higher deposit rates, lower charges, and more convenient services in comparison to the traditional financial institutions.
The neobank – a rising star among the financial technology trends focused on providing services via the Internet and mobile technologies (what is especially valuable for Gen Z consumers) will definitely continue attracting significant investments throughout 2020 and beyond.
#4 Cooperation between fintechs and traditional financial institutions
Surely, at first glance, the differences between the conservative banking environment and cutting edge approach of fintech startups are so huge, that the idea of the partnership may seem far-fetched.
However, the potential benefits of intelligent cooperation between fintechs and banks are enormous. Minimizing competition allows banks and fintech to develop and introduce new-sophisticated solutions much faster.
Both banks and fintech companies can help each other greatly. For example, banks can guarantee fintechs a reliable brand, access to an established customer base, and trust. Through cooperation with banks, fintech startups can solve such problems like lack of capital and experience as well as complex legal restrictions.
In turn, due to fintech partnership banks can benefit significantly from fintech companies’ ability to innovate, which is extremely important considering today’s competitive landscape of the financial industry.
#5 Governments to tighten rules on financial technology
We all remember that back in 2008 bitcoin was not taken too seriously at first, while today cryptocurrencies are one of the mainstream topics all over the globe.
However, the lack of cryptocurrency-related regulations has caused fraud waves in the financial services industry. The rapid expansion of cybersecurity threats has finally forced slow-to-respond politicians to start to discuss crypto-related regulations.
Yet, given that there are still few members even in the most advanced governments who are highly competent in matters related to innovative technologies, like digital banking, cryptocurrency, and blockchain, it can be assumed that the pace of addressing fintech regulations will not be as fast as many would like it to be. This means that notwithstanding that during 2020 regulators will be actively creating comprehensive sets of national standards, businesses and consumers will have to operate in a loosely-regulated cryptocurrency market for some time yet.
#6 China to dominate the financial services industry
China’s fintech market has become the center of global fintech innovation in recent times. Moreover, the country has taken the lead in almost all fintech categories.
Yet, what are the major key success factors for the China fintech market?
Among them are:
- Access to large volumes of proprietary data and the ability to draw insights from the data
- Broad customer base
- Availability of comprehensive fintech products
- Strong understanding of financial services
Combine the above and many other factors that determine the rise of China’s fintech now, and you will see why China will continue to dominate the global fintech market in 2020.
Now you’ve explored the top 6 global trends in fintech for the current and upcoming years. It is clear that the fintech players are going to enjoy 2020 despite the pandemic that affects multiple industries.
Even with the introduction of strict laws and regulations governing fintech businesses, the industry will continue to gain traction, with China in the lead. Financial technologies being in demand in 2019, such as AI or neobanks, will become even more popular.
At the same time, fintech firms in 2020 are going to focus on collaboration with traditional banking institutions, rather than on competition with them.
These are the major trends in finance and technology, as we see it today. We hope you have found this article useful and enjoyed the insights we’ve shared with you. Visit our website for more of our expertise in fintech and other areas.
If you’d like to chit-chat about implementing your fintech idea, feel free to contact our support team. Our high-qualified software engineering experts will be glad to support you in bringing innovative ideas into reality!